Correlation Between US Financial and CGX Energy

Can any of the company-specific risk be diversified away by investing in both US Financial and CGX Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining US Financial and CGX Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US Financial 15 and CGX Energy, you can compare the effects of market volatilities on US Financial and CGX Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in US Financial with a short position of CGX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Financial and CGX Energy.

Diversification Opportunities for US Financial and CGX Energy

0.38

Correlation Coefficient

US Financial  CGX Energy

Weak diversification

The 3 months correlation between FTU-PB and CGX is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 and CGX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGX Energy and US Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on US Financial 15 are associated (or correlated) with CGX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGX Energy has no effect on the direction of US Financial i.e., US Financial and CGX Energy go up and down completely randomly.

Pair Corralation between US Financial and CGX Energy

Assuming the 90 days trading horizon US Financial 15 is expected to generate 0.29 times more return on investment than CGX Energy. However, US Financial 15 is 3.49 times less risky than CGX Energy. It trades about 0.04 of its potential returns per unit of risk. CGX Energy is currently generating about -0.05 per unit of risk. If you would invest  572.00  in US Financial 15 on October 11, 2024 and sell it today you would earn a total of  165.00  from holding US Financial 15 or generate 28.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

US Financial 15  vs.  CGX Energy

US Financial 15

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, US Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CGX Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CGX Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with US Financial and CGX Energy

The main advantage of trading using opposite US Financial and CGX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Financial position performs unexpectedly, CGX Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CGX Energy will offset losses from the drop in CGX Energy's long position.

The idea behind US Financial 15 and CGX Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.